Public offering of bonds painless compared to shares

http://business.timesonline.co.uk/tol/business/columnists/article6586951.ece

by wesleyd • 17 years ago

8 1 17 years ago

business.timesonline.co.uk

mdasen• 17 years ago

The difference is that shares are a portion of the company that you're giving away along with the rights of partial ownership and such. Selling bonds is essentially like getting loans. You find that a bank will lend you the money you want at 7% interest and that investors will buy your 6% interest bonds. So, you sell the bonds to the investors and your costs are lower.

With stock, they get a share of your company and if it does better than expected, they get more. With bonds, it's fixed. Should your company go under, they're entitled to be paid before your shareholders are. And if you own the company, that means that the bondholders will get their money back before you get to see anything from the failed business.

While bonds are by no means no-risk items, they're very different from stocks and more akin to the loans that a bank would make.

Public offering of bonds painless compared to shares

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